Tesla (NASDAQ: TSLA) shares may have stabilized in recent days, but a longtime critic of CEO Elon Musk still believes it’s too risky to bet against the electric car maker. In recent comments, he noted that Tesla bear Carson Block has admitted that it is no longer cutting TSLA, simply because it is too dangerous to go against Musk and his electric vehicle company.
Block, the founder of Muddy Waters Capital LLC, is a leading critic of Elon Musk. However, in an interview with BloombergTracy Alloway and Joe Weisenthal at the Odd lots In Wednesday’s podcast, the short seller stated that it no longer has bear bets against Tesla.
“I am not lacking in actions, thank God. We used to joke that Tesla, when he files for bankruptcy, will likely have a market cap of $ 30 billion. Cut at your own risk. I wouldn’t do that, ”Block said, although he noted that he still believes Tesla’s business is unsustainable.
Tesla has seen an increase of more than 300% since mid-March. Amid this massive run, and as the company exceeded expectations by delivering more than 90,000 vehicles in the second quarter, TSLA’s shares have gained more followers, especially among retail investors. As of Wednesday, Tesla shares were trading at 182 times their 12-month earnings, compared with 10 times for rival US automaker General Motors.
During his segment, Block stated that, at one point, he had a TSLA position that involved buying the electric car maker’s convertible bonds and using coupon payments to finance long-term stocks. Finally, the short seller admitted that he sold the debt and allowed the options to expire. Block then issued a warning to fellow Tesla bears, stating that it is very risky to bet against Elon Musk.
“It is one thing to bet on Elon Musk, but another is to bet against him. The guy specializes in pulling rabbits out of the hat, ”he said.
While Block was cautious enough to warn short sellers to want to bet against Tesla, references to Elon Musk “taking rabbits out of the hat” suggest that the founder of Muddy Waters Capital still maintains a fairly limited view of operations and the expansion of the company. It’s easy to notice that Tesla’s vehicle records fell in California during the second quarter, for example, but one shouldn’t neglect the effects of the pandemic or the company’s numbers compared to other automakers.
Tesla is also expanding its vehicle production and deliveries outside the United States, and this was no more evident than in the second-quarter results. During the quarter, the company’s deliveries in the US were negatively affected by the pandemic, but Model 3 sales rebounded in China, fueled by a ramp in Gigafactory Shanghai. And if Gigafactory Berlin goes live with production of Model Y next year as planned, Tesla’s sales will be further bolstered. Very few Tesla critics also acknowledge the potential of Tesla Energy, which is finally beginning to grow its operations.
Disclosure: I do not own TSLA shares and I have no plans to start any position within 72 hours.
